The risk-free rate is 5% and the dividend yield on an index is 2%.Which of the following is the delta with respect to the index for a one-year futures on the index?
A) 0.98
B) 1.05
C) 1.03
D) 1.02

Question

Quizplus · Accepted Answer

The futures price is given by F₀=S₀e⁽^r-q⁾^T Hence the delta of the futures with respect to the spot is e⁽^r-q⁾^T.In this case,this is e^(0.05-0^.03)×1=1.03

The Risk-Free Rate Is 5% and the Dividend Yield on an Index